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Monday, 27 March 2017

China Aviation Oil

28/3/2017
Buy - tp 2.00
  1. Attractive valuation: PE 10.31
  2. Strong growth story - aviation industry, China, potential acquisitions with cash
  3. Competitive advantage - sole supplier in China and growing global presence
Metrics
  • Last Done (as of 28/3/2017): S$1.50
  • PE 10.31, PB 1.41
  • Total Debt to Equity 15.39%
  • Dividend yield ~2%, consistent through tough times and growing
  • ROE 14.31%, ROA 8.12%
Operations
  • Jet fuel supply and trading
    • Largest physical jet fuel trader in the Asia Pacific region
    • Sole supplier of imported jet fuel to the civil aviation industry of the People’s Republic of China (17 airports)
    • Supply jet fuel to airline companies in Asia Pacific, North America, Europe and the Middle East (38 airports)
  • International trading of jet fuel and other oil products
    • Fuel oil, gas oil and aviation gas
  • Acquisitions of oil related assets
Revenue: 51% China, Rest 49%

Growth story
  • Competitive advantage in the Chinese civil aviation market
  • China is set to be the world’s largest civil aviation market by the 2030s - CAAC
  • China’s “One Belt, One Road” initiative
    • Under China’s 13th Five-Year Plan, CAAC targets to have 260 airports in China
  • Associate companies catering to other countries - leading global presence
  • Growing cash hoard - ripe for acquisitions
Risks
  • Macroeconomic uncertainties - Oversupply of oil, depressed oil prices, volatilities in financial markets and geopolitical uncertainties


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